Systems for transferring value have evolved in two directions. In one direction, represented by credit cards, each value-transferring transaction is individually authorized online by a centralized clearinghouse and recorded at the time of the transaction. Authorization typically consists of verifying whether the account number read from the card has sufficient credit to engage in the proposed transaction. These systems are typically usable for a broad variety of transactions involving different vendors. In the other direction, represented by prepaid phone cards or subway tickets having a remaining value encoded on a magnetic stripe, there is no record of individual transactions. Inspection is performed off-line without a central clearinghouse by verifying that sufficient value for the transaction is physically encoded on the card. These systems typically can be used for transactions involving only a limited number of vendors.
Recently, "smart cards" having a microprocessor embedded in the card have been developed. These permit a variety of accounts to be encoded on a single card. This permits value to be added to as well as removed from a variety of accounts. A smart card is therefore typically equivalent to a plurality of one of the cards described above.
A recent innovation is the Mondex card used to create an electronic form of currency. A system using the Mondex card permits a user of the system to transfer a data packet representative of cash to another user of the system in such a way that the recipient of the data packet can transfer it again to yet another user of the system, for value, or to a bank, for credit to an account. Unlike the credit card systems described above, the Mondex system permits transactions to take place off-line without the intervention of any centralized clearinghouse. Unlike the debit card systems described above, the cash equivalents circulating in a Mondex system can be used to pay a variety of different vendors.
The Mondex system falls short of implementing a true replacement for physical cash. In the Mondex system, cash is never actually minted. It is merely recognized as value being depositable in a bank. In addition, security is limited and rudimentary. There exists no effective way to authenticate the circulating data packets and to detect counterfeits.
There exists a need, therefore, for a system of circulating data packets representative of cash in which an authentication mechanism reliably detects counterfeit data packets.